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Ending Taxes on Social Security: Pros & Cons
Sean Williams explains what is popular is not always savvy. Donald Trump is campaigning to end income tax on Social Security benefits. Williams explains the origin of taxing benefits in the 1983 rescue law and then the 1993 change that made more benefits taxable. Brackets where taxation kicks in have never been indexed for inflation, and thus more people are ensnared each year. But the real trouble with ending the tax is it would hasten insolvency of the program. Although the 12.4% payroll tax on earned income generates the lion’s share of income (about 91%) for Social Security, the taxation of benefits has been growing into an increasingly important source of income. Full article here.
As an example of the leading thoughts on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized. This can be achieved without tax increases by slight modifications to cost of living adjustments and payments to high income beneficiaries plus gradually increasing the full (but not early) retirement age. AMAC Action, AMAC’s advocacy arm, supports an increase in the threshold where benefits are taxed and then indexing for inflation, and calls for eliminating the reduction in people’s benefits for those choosing to work before full retirement age. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade.